There can be no strict line of demarcation between a reasonable time and an unreasonable time. What is reasonable time in one case under a particular set of circumstances may not be so in another case where those circumstances do not exist. “One decision goes but a little way to establish a precedent for the other”. Although the Madras High Court has held that what is reasonable time is purely a question of fact1) it is really a mixed question of law and fact2)
Section 105 of the Negotiable Instruments Act,1881.
In determining what is a reasonable time for presentment for acceptance or payment, for giving notice of dishonour and for noting, regard shall be had to the nature of the instrument and the usual course of dealing with respect to similar instruments; and, in calculating such time, public holidays shall be excluded.
The factors such as the distance between the parties, the available communication, the usual course of dealing, and the nature of the instrument must be considered by the court in arriving at a decision as to whether the particular time in the case is in law reasonable.
In Indian Bank vs Boorugu Nagaiah Rajanna3) the Hon'ble Andhra Pradesh High Court held that:
”It is pointed out that notice of dishonour must be given as soon as the instrument is dishonoured and it must be in all events within a reasonable time thereafter and what is a reasonable time depends on the facts and circumstances of each case. In other words, the holder of a bills of exchange comes to know of the dishonour of the bills of exchange presented to the drawee, the moment he comes to know of that, he has to issue a notice of dishonour and despatch it by the next post or on the day next after the day of dishonour or within a reasonable time.“
What constitutes reasonable time also varies according to the nature of the instruments. Thus, a bill of exchange payable on demand cannot be placed on the same footing as a promissory note payable on demand, nor does a cheque fall into the catagory of either of the two. Different considerations will weigh with the court in determining what will constitute a reasonable time with respect to the presentation for payment of each class of the aforesaid instruments. The reasonableness of the time for presenting a bill of exchange for payment is a mixed question of law and fact depending on the particular circumstances of the case. Bills on demand are meant for immediate payment while the notes on demand are not meant for immediate payment as they are continuing securities , and, therefore, reasonable time for presentment of the two will be different. A bill payable on demand should be presented the next day after the payee has received it if the parties live in the same place. If the bill be sent by post for presentment it must be presented for payment on the day following the day of receipt.
It has already been stated that a promissory note payable on demand differs from a bill payable on demand as the former is, and the latter is not, a continuing security. The effect of this is that such a pronote is not meant for immediate payment and, therefore, a more liberal construction may be given to a reasonable time in the case of presentment for payment of promissory notes than in the case of bills.
Cheques are not generally intended by the drawer for being long in circulation, and, therefore, the holder must present it for payment as early as he can. If the holder, without presenting it early, keeps it in his hand longer than is necessary he does so at his own risk. Although the drawer remains liable, except to the extent of the loss suffered by him on account of the laches of the holder, the intermediate parties will be absolutely discharged by non-presentation within a reasonable time. Cheques have, therefore, to be presented not later than on the next day after they are received, if the place of delivery and payment be the same, before the closing of the banking hours. But if the place of delivery be different from where it is payable, the cheque will have to be sent on the day following the day of delivery to the place of payment either by post or through a messenger and the presentation for payment will be considered to be made within a reasonable time if it is done on the next day following its receipt. In calculating such reasonable time public holidays are to be excluded. The same rule will apply if the holder does not receive the instrument directly from the drawer but receives it by endorsement or delivery from the payee, the intermediate parties each getting a day to take the necessary steps (See also notes to sections 73 and 84)
In the case of dishonour it must, as has already been stated, be noted on the same day although protest may follow later. The application of this strict law will entail considerable hardship in this country as there are no notaries in rural areas and as there is no provision of noting and protesting by a householder or a substantial person of the locality when notaries are not available.
Section 106 of the Negotiable Instruments Act,1881.
If the holder and the party to whom notice of dishonour is given carry on business or live (as the case may be) in different places, such notice is given within a reasonable time if it is despatched by the next post or on the day next after the day of dishonour. If the said parties carry on business or live in the same place, such notice is given within a reasonable time if it is despatched in time to reach its destination on the day next after the day of dishonour.
This section deals with the time of notice of dishonour. It lays down a definite time when such notice of dishonour shall be given. When the parties live in different places it is the time of despatch that is material, no matter when the notice reaches. But when the parties live in the same place the time of despatch of the notice should be such that the notice reaches the party on the next day after the day of dishonour.
The distinction made between the two cases is due to obvious reasons. Where the parties live in different places the time of reaching of the notice would depend on the distance and the nature of communication. Therefore, in such cases it is the time of despatch that can be fixed and not the time of reaching of the notice which is dependant on uncertain factors. There is something vague in the section. When the parties live in different places, if the notice is not despatched by the next post but the other alternative time provided for in the first paragraph of the section e.g. the next day be availed of to despatch the notice, will it be sufficient to send the notice by the last post of the next day if there are more than one post on the same day. The point is not clearly stated. But it is submitted that since the whole of the next day can be availed of, it will be a sufficient notice if it is sent by the last post. But what will be the position if there be one post on the day of dishonour but none on the next day. Since the word used is despatched it will, it is conceived, be a good notice if it is merely posted on the next day.
If, however, the holder takes some time to ascertain the address of the person to whom the notice is to be sent the time spent therefore will be excluded from the time necessary for giving notice of dishonour. So also public holidays are to be excluded. Time is an element of utmost importance in regard to the sending of the notice of dishonour. It must be given within a reasonable time after dishonour. Notice may be given as soon as it is dishonoured. If it is given on the last day of grace, no right of action accrues until the following day. The acceptor or the maker can make payment even after dishonour before the last day of grace expires.
If in the ordinary course of post the notice would reach its destination on the right day it is sufficient. Post marks are presumptive, but not conclusive, evidence of the date of posting.
In the absence of custom or local usage to the contrary the rule of notice of dishonour laid down in this section will apply to hundis. Prior to the passing of this Act the rule of notice of dishonour in case of hundis was not so strict under the Hindu Law Merchant Reasonable notice and not immediate notice of dishonour was necessary. Reasonable time was determined by the custom of the locality.
Section 107 of the Negotiable Instruments Act,1881.
A party receiving notice of dishonour, who seeks to enforce his right against a prior party, transmits the notice within a reasonable time if he transmits it within the same time after its receipt as he would have had to give notice if he had been the holder.
We have seen that under the previous section a party must give notice of dishonour within a reasonable time i.e. on the next day after the day of dishonour. The same rule will apply to each of the parties to a negotiable instrument who seeks to bind his prior party by giving him notice of dishonour. That is to say, each party will have only one clear day to send a notice of dishonour to a prior party, whether immediate or not, sought to be made liable under the instrument. Each party will be bound to despatch his notice to every other party on the next day after the day he himself receives it. Thus, where a bill passed through, say, five persons all of whom lived in the same place and the bill was dishonoured, the holder gave notice on the same day to the fifth endorser who on the next day gave it to the fourth, and so the fourth to the third, and so on, the notices were good.4) But if the holder, in such a case, wanted to give notice to the first endorser direct he would have to do so on the next day after the day of dishonour and would not be able to extend the time of such notice by having as many days as there were endorsers. The provisions of sections 93, 94, 105, 106, 107 show that the holder of a bill of exchange or hundi is bound to give notice of dishonour at the earliest opportunity to all the parties whom he desires to make liable thereon.